Forex Fundamental Analysis – Political uncertainty in Europe further keeps euro bulls on the defensive



The EUR/USD exchange rate rose during the Asian session on Tuesday and is currently trading in the 1.0765-1.0770 area. However, there is currently a lack of strong follow-through buying. Furthermore, the fundamental backdrop and technical situation call for some caution before positioning for a continuation of the previous day’s modest bounce from the 1.0735-1.0730 area, or one-month low.

The US Dollar (USD) continues to be well supported by growing recognition that the Federal Reserve (Fed) may keep interest rates on hold for longer, helped by stronger-than-expected US jobs data released on Friday. In addition, the decision by French President Emmanuel Macron to call a snap election later this month has increased political uncertainty in the Eurozone’s second-largest economy, which could continue to undermine the common currency. This, in turn, favours bearish traders and confirms a negative outlook for EUR/USD in the near term.

Conversely, the overnight low around 1.0735-1.0730 now seems to protect the near-term downtrend ahead of the round figure of 1.0700. Further selling will be seen as a new trigger for bearish traders, taking the EUR/USD pair to the next relevant support around 1.0650-1.0640. Eventually, spot prices could fall towards testing 1.0600, or the low since the beginning of the year reached in April.

Trade recommendation: Trading mainly by Sell orders from the current price level.

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